The bull market is put to the test as volatility surges and overheated assets cool. Test may not be completed | Wilnesh News
The Chicago Fed president used a CNBC appearance to refocus investors’ attention on still-encouraging inflation trends and the possibility that interest rates still have room to adjust, a tumultuous week on Wall Street that ended with “Thanks Goolsby, Today It’s Friday”‘s rally ended. Cuts come against the backdrop of a healthy economy. Friday’s mitigating 1.1% rebound in the S&P 500 also came in large part due to tame personal consumption expenditures (PCE) inflation data that morning, not to mention that after three weeks of underground selling pressure, the stock market has been quite It’s bleak. Neither Austan Goolsbee’s expected reassurance nor Friday’s index rebound were enough to fully offset a rapid repricing of the Fed’s path to setting interest rates next year, nor were the S&P 500’s gains on Wednesday after the Fed’s decision The impact of a 3% drop following the decision and outlook. In some ways, however, some erratic moves in stock indexes, a spike in volatility and a reversal in some overheated assets are long overdue and may be necessary to test the bull market against higher bond yields and a murkier policy outlook . Who’s to say the testing process is complete? .SPX YTD mountain S&P 500, YTD Markets enter December on a high with confidence in the outlook based on the current market uptrend, the Federal Reserve’s orderly seasonal easing, seasonal tailwinds, and whatever policy outcomes investors choose to assume. . Strategists are unanimously bullish on their 2025 index targets, with cryptocurrencies, Trump-themed Big Tech and low-quality/high-beta speculative bubbles surging. These organizations have taken corrective action to varying degrees, with the likes of MicroStrategy losing a third in the past month, although it’s impossible to say a proper purge has occurred there. MSTR 1M mountain MicroStrategy, 1 Month Divides within markets have widened to a fragile level, with a steady rise in U.S. Treasury yields and a rollover in the Economic Surprise Index giving Fed Chairman Jerome Powell hesitation in his decision-making Indecision and indecision. As Bespoke Investment Group puts it, in these more shades of gray, “any honeymoon that might have gone smoothly becomes a reality check.” The somewhat reassuring news is that this reality isn’t a particularly worrisome one. —At least not yet. U.S. GDP continues to be above the long-term trend, corporate profit growth forecasts for 2025 remain favorable, credit conditions remain rock solid, and the long-term bull trend has not been seriously damaged. The market’s decline over the past week has a ghost-of-Christmas flavor, bringing back dark memories of December 2018 for some. . The sell-off reached its climax just before Christmas, with some aggressive portfolio rebalancing back into stocks, even though it had already begun in October. The current pressures are not that serious, nor are the Fed’s messages that serious, it is just that the central bank is feeling its way towards a neutral policy rate, but there is no consensus yet, other than still being below current levels. 2025 Preview? Citi strategist Scott Chronert summed up the market’s latest moves as a preview of the expected push-pull effects that could bring dynamism into 2025: “From our perspective, this largely drives our outlook for the first half of 2025. concerns, especially as we believe the market will have to go through a period of policy uncertainty before we can refocus on possible policy opportunities. From a purely tactical perspective, the S&P seems to have accomplished some valuable work last week. The 500 index fell back to check levels the morning after Election Day and held there. Happily, the broader market did manage to fight the prevailing oversold conditions on Friday with an impressive broad-based rally. The VIX chart now shows a nice prominent peak, rising above 27 and back to 18 for a few days, showing signs of fever before disappearing again. Still, the negative market breadth is severe enough, especially in the economy. Sensitive industries, technical analysts believe that the window for market improvement is quite short before more ominous macro messages begin. The personal consumption expenditures inflation report released on Friday showed that U.S. Treasury bonds did not rise significantly, and the actual 10-year maturity. Interest rates (adjusted for market-based inflation) remain above 2%, a level that has historically constrained the economy and caused the stock market to pause. Without a significant decline in yields, the housing industry appears to be in trouble indefinitely throughout the next 26 months. A one-line bull market story: “Inflation is falling faster than the economy is slowing. To be sure, the onslaught of investment in artificial intelligence has provided a huge boost, lifting the index out of a general stagnation in earnings growth. The Fed hinted last week that from now on, the interplay between inflation and economic growth will be less Clearly, and no longer clearly benign, while fiscal policy settings are starting to look more unruly than many fund managers suggested at the end of the year, staunchly bullish commentators like to point out that the current bullish phase is not particularly ripe for 1945. The average duration of subsequent cyclical bull markets (defined as a time span in which an index falls 20% or more) is more than five years, but the average lifespan is unusually long since 1987 to 2000 and 2009 to 2020. The setbacks that characterized the gains (1990, 1998, and 2011) did little to stop them from suffering losses, which reminds us that after two consecutive years of 20% growth, there was little to show for it along the way. After a 10% correction, the road to greatness is often a rocky one.
